Skip to main content

Opening Bell: 6.9.06

Oil Prices Up Amid Continued Iraqi Unrest (AP)
Well that's, um, bizarre... and here we were thinking that the death of Zarqawi would pretty much put an end to the chaos in Iraq. Turns out maybe not. The real question, for the insurgents turns now to succession planning. Why is the market still volatile after Zarqawi's death? Because, as has been said a million times, the market hates uncertainty. Who's going to take his role? They haven't even named an interim. Everyone is jostling for their chance to move up the pyramid. Are they going to split the CEO/Chairman roles? Can anyone combine his hard-nosed tactics and his media flare? Will they look outside the insurgency for new leadership, or will they pick from their own ranks? Only questions for now in these pivotal days.
NYSE Probes Whether Short Sellers Fueled Steep Decline in Vonage Shares (WSJ)
Jeffrey Citron, meet Patrick Byrne. A probe has been launched, looking into whether there was naked shorting of Vonage stock, right off the bat as it went public. On the first day of trading, up to 5 million shares may have been shorted, which would suggest that not all of that volume had been properly borrowed. Still, one gets the impression that whenever a company's stock does badly, it's become cool to blame naked short sellers. PatrickByrne may be seen the way the left sees Cindy Sheehan -- derided as a nut in the media, but eventually seeing vindication by getting an issue into the public debate. Every time there's another one of these investigations, it's another victory for the man from Overstock.
House Backs Telecom Bill Favoring Phone Companies (NYT)
The whole debate leading up to this telecom bill was unusually intense and popularly followed. Even celebrities joined the fray, like Moby and REM with their impassioned pleas for 'net neutrality', which they labeled the first amendment for the internet, the idea that no ISP or provider could place any limitations over its pipes. Alas, it was not to be. Even though Google's Sergey Brin came to town, he was no match for the telco lobbyists that have probably been playing this game for the last 50 years. This has got to be a bitter shock for Moby, but one gets the impression that he'll probably move on to something else pretty quickly. But if you see him at Teany, buy him a ginseng green tea for his efforts.
U.S. CPI to Rise 3% During 2006, Bush Aide Says (Bloomberg)
It's too bad Edward Lazear, the chairman of Bush's Council of Economic Advisors, wasn't nominated to replace Greenspan. He seems like a much more optimistic chap. He expects the CPI to rise only 3%, compared to the 3.7% last year, and predicts that GDP will grow at a clip of 3.6%, compared to the 3.2% last year. So what's everyone so worried about now? But (and this is the real killer) he's using a phrase that's only ever uttered right before recessions; he said he's hoping that economic growth will ultimately cool into a "soft landing". Yikes.

Is Vonage the new MCI? (GigaOM)
Now that the slaughtering already happened, we're seeing the surviving Vonage bulls come out one by one. Daniel Berninger, a former Vonage employee and telecom analyst makes the case. Basically, he says, there's no competition. The packaged plans, such as those from the cable companies for digital voice are priced in some cases twice as much as Vonage's. On the other hand, it's a joke to call Skype a competitor -- it's not yet a substitute for a phone line. He compares Vonage's Jeffrey Citron to MCI's Bill McGowan, a maverick who dared to fight the Ma Bell telephone monopoly -- a great thing, but vindication of an entire company?
Disney-Ovitz decision upheld (Houston's Clear Thinkers)
Corporate lawyers had really been in a lather over this case, on whether Disney shareholders had the right to pursue a lawsuit against the company over its large payoff of Michael Ovitz when he was seen the door. Everyone can breath sigh of relief, the Delaware court affirmed an earlier decision that put an end to the lawsuit. Hooray, severance as much as you want.
Intel: Prepared to cut prices quickly
Intel is going to aggressively cut prices in a bid to staunch the AMD-induced bleeding. The company has signaled to partners that it may slash down new advanced chips by as much as 60%. But the company is giving mixed messages, as it says that they only want to trim inventory and that they're not "cutting prices for the sake of cutting prices", whatever that means. So far, analysts have responded to the move by trimming their views on both chip companies, out of fears of a price war.
Toyota Stands Ready To Expand Texas Plant (WSJ)
Exuding strength and confidence about its truck business, Toyota says it's open to building more capacity in Texas. The company says its San Antonio plant is slated to begin production later this year -- when they built it, they intentionally went far out of the city, so that should they ever need to expand, they'd have ample space. This is in contrast with some of the best GM plants out there, which are unfortunately hamstrung by their suburban dwellings, which make expansion all but impossible.
Lunch with Warren Buffett, Anyone? (BusinessWeek)
In a few weeks an auction will start for the annual charity lunch with Warren Buffett. The bidding, on eBay, will start at $25,000, but will probably rise into the six figures, as various Greenwich luminaries angle to pick the brains, get their pictures taken, and devour steak at Smith & Wollensky with the Oracle from Omaha. It's a surprise he doesn't make the winning bidder fly all the way to Omaha and eat at Gorat's. But if you're gonna pay that much money, he can probably spring for his own ticket. Also, you can invite up to six of your friend along with you, but don't just pick anyone. You don't want random chatter from the family, while you're trying to match wits and milk a stock tip out of the man.